The Ugandan shilling was stable against the dollar on Tuesday and the market was banking on offshore investor appetite at this week's Treasury bill auction to boost the currency.

Some analysts said weighted average yields were likely to climb at the auction on Wednesday when Treasury bills of worth 120 billion shillings are on offer.

The central bank left its key lending rate unchanged at 21 percent this month from March, signaling eagerness to keep yields on Ugandan debt fairly attractive to foreign investors whose dollars are a key prop of the local currency.

At 0941 GMT commercial banks in Kampala quoted the shilling at 2,500/2,510, a touch weaker than Monday's close of 2,495/2,505.

"There was dollar demand in the interbank market which caused the slight drop for the shilling but the volumes were small," said Robert Mpuuga, a trader at Housing Finance Bank.

"The decisive factor that the market is watching out for is the auction and whether we do get conversions by foreign investors," he said.

The Bank of Uganda (BoU) paused its monetary policy easing cycle, despite a steep fall in inflation, after its surprise rate cut last month and a slump in yields spurred a plunge of the local currency to its 2012 low of 2,620 on March 6.

"The decision to pause has restored confidence in the shilling so the market is optimistic we might see significant foreign debt uptake," said Denis Mashanyu, trader at Standard Chartered Bank in Nairobi.

"If that expectation comes through we'll possibly see the shilling climb a few notches up."

At the last auction on April 4, the weighted average yields on the 91-day paper rose to 18.1 percent although rates on 182 and 364-day bills dropped slightly.